Beware the Boilerplate: New Jersey Court Finds Discrimination from Language in an Unsigned Settlement Agreement

Just in time for Halloween, on October 31, 2018, a New Jersey federal court held that an unsigned, non-binding separation agreement could provide relevant background evidence of age discrimination, and that employers anywhere could be subject to the reach of the New Jersey judiciary, even if they have no contacts with the state.

Facts

Kathleen Fowler worked for AT&T, Inc. (“ATTI”) and AT&T Services, Inc. (“ATTS”) (collectively, “AT&T”), for more than 30 years until her employment was terminated. Kathleen Fowler v. AT&T, Inc. & AT&T Services, Inc. At the time of her termination, she was 60 years old and undergoing chemotherapy for breast cancer. She sued AT&T in the United States District Court for the District of New Jersey, claiming that the company engaged in age and disability discrimination when it erroneously told her that it was eliminating her position and that she was being placed on “surplus status,” meaning she had 60 days to find another job within AT&T or be terminated. While on surplus status, she applied internally for other positions like her former job, which AT&T rejected. Instead, AT&T placed her in a different position and then failed to reasonably accommodate her disability so that she could perform that job or be transferred to another vacant position. Meanwhile, of the 69 people in Fowler’s former unit, only two were selected for surplus, Fowler and another person who was aged 52. Nobody under the age of 40 was selected for surplus.

AT&T terminated Ms. Fowler’s employment and offered to pay her severance in exchange for her signing a separation agreement that included a general release and waiver of liability, including age discrimination claims. Ms. Fowler did not sign the agreement.

In her complaint, Ms. Fowler alleged that the (unsigned) release ran afoul of the Older Workers Benefit Protection Act (“OWBPA”). The OWBPA is a federal statute aimed to protect older employees by requiring employers to provide specific information in exchange for a waiver of age discrimination claims. Ms. Fowler alleged that the release was invalid under the OWBPA because it contained factual misstatements, failed to comply with OWBPA’s strict disclosure requirements, and was intended to harm workers aged 40 and older.

ATTS’s Motion to Strike

ATTS moved to strike the allegations in the complaint related to non-compliance with OWBPA. ATTS argued that because Ms. Fowler did not sign the separation agreement containing the release that she claimed violated OWBPA, those allegations were immaterial to her age discrimination cause of action and would only serve to invite unnecessary discovery and cast ATTS in a prejudicial light. In opposition, Ms. Fowler argued that the allegations related to ATTS’s release were relevant because they reflected the company’s age bias. In reply, ATTS argued that the alleged OWBPA violation could not support a showing of age bias because the Third Circuit in Lawrence v. National Westminster Bank N.J.previously held that an employee who does not sign a waiver or release cannot establish a violation of OWBPA.

The District Court denied ATTS’s motion to strike, finding that ATTS’s non-compliant release suggested a pattern or practice of age-based bias. The court was unpersuaded by ATTS’s reliance on Lawrencebecause, unlike in Lawrence, Ms. Fowler did not bring a separate cause of action under OWBPA; rather, she alleged that ATTS’s conduct was inconsistent with OWBPA, the statute designed to protect older employees, which revealed a pattern of age-based bias.

ATTI’s Motion to Dismiss

ATTI moved to dismiss Ms. Fowler’s case against it for lack of personal jurisdiction. Personal jurisdiction refers to a court’s power to make decisions regarding an entity’s legal rights or obligations. There are generally two types of personal jurisdiction. First, a court can have general jurisdiction over an individual whose residence is in the forum state and an entity whose place of incorporation and/or principal place of business is within the forum state. Second, a court can exercise specific jurisdiction over an entity in a lawsuit filed against it when i) the entity purposely directed its activities at the forum state; ii) those activities are what led to the lawsuit; and iii) the assertion of jurisdiction comports with fairness.

In Fowler, the court had personal jurisdiction over Ms. Fowler because she was a New Jersey resident. ATTI moved to dismiss claiming the New Jersey District Court lacked personal jurisdiction over it because it is a Delaware corporation with its principal place of business in Texas. ATTI does not employ, own real property, insure persons or property, pay taxes, contract, operate, or produce goods or services in New Jersey, nor is it even registered to do business in New Jersey. Nevertheless, the court held that, because Ms. Fowler’s claims against ATTI arose out of a release directed at her in New Jersey, ATTI should have expected that it could be hauled into court in New Jersey to litigate disputes over that conduct. Thus, the court held that it could exercise specific personal jurisdiction over ATTI.

Bottom Line

Employers must ensure that separation agreements containing a release and waiver of age discrimination claims comply with the precepts of OWBPA, even if the agreement is just an offer and is never signed. More generally, this case serves as a harsh reminder that an employer’s course of conduct, although not alone sufficient to sustain a separate cause of action, may be probative of the employer’s discriminatory animus. Courts routinely allow employees to allege and introduce evidence of their employers’ other acts to prove a discriminatory attitude in making the employment decision at issue. For instance, an employer’s history of treating its older employees poorly may provide an evidentiary source for employees to tap to prove the allegations of discrimination against them individually.

With respect to personal jurisdiction, Fowler reaffirms the principle that a court in New Jersey can make decisions about an employer that has no contacts in this state if the employer purposely directed the alleged conduct at residents in New Jersey. Employers may not be able to escape the authority of the New Jersey judiciary and the potential liability imposed on it by New Jersey law by simply incorporating and operating outside of the state.